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AccountAbility
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« Reply To This #13 on: February 28, 2008, 09:14:11 PM » |
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Welcome to Kiva Friends, Sweetiepetes. While the number may come as a shock, with extremely small loans for very short periods of time, even a very small amount of interest in real terms can produce a high percentage.
As a simple example, if the Partner passes on the $50 it costs them to process a $500 loan for 6 months, the simple interest rate would calculate out to 33.5%.
And when you understand that many borrowers are a distance from any branch office, requiring loan officers to sometimes travel hours to meet a borrower each month, and that the borrower is often provided with training and other help to ensure that the business is successful, these interest amounts are put in perspective.
Lastly, since many of the Field Partners are themselves non-profit organizations, their goals are to charge only enough interest to pay expenses and to grow to be a solid sustainable micro-lender in their area. This too is Kiva's goal.
There is another thread here on this forum that has had lengthy discussion about interest rates charged to borrowers and what is fair and reasonable.
Dan
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